To say Amazon killed it in the first quarter of 2021 would be a drastic understatement. In its latest earnings report, posted Thursday, the e-commerce titan easily beat expectations on earnings and revenue, with sales that ballooned 44 percent year-over-year.
Analysts anticipated earnings per share to come in at $9.54, but instead Amazon pulled in $15.79 a share from January to March, for total earnings of $8.11 billion.
Revenue blew past the $104.47 billion expected by more than $4 billion, clocking in at $108.52 billion, and net sales hit $108.5 billion, a significant jump compared to the $75.5 billion from the first quarter of last year. Amazon Web Services edged out estimates by pulling in $13.5 billion in revenue, as opposed to $13.23 billion.
Altogether, the numbers defy any notion that Amazon’s record-breaking success during the pandemic-fueled 2020 had no more room to climb. And it’s not done yet: Now, having pulled off a second consecutive quarter of sales topping the $100 billion threshold, it forecasts that a third is in the offing.
Boasting more than 200 million paid Prime members worldwide, the company believes net sales in the second quarter will land somewhere between $110 billion and $116 billion for growth of 24 to 30 percent, year-over-year. Wall Street, which projected $108.6 billion, seemed thrilled, sending shares up more than 5 percent in after-market trading.
That the e-tailer benefited from shelter-in-place orders is beyond question, as consumers flocked to its marketplace for their essentials.
“It is clear that Amazon continues to reap the benefits from the broader consumer behavior shift toward e-commerce. The company crossed $100 billion this quarter in revenue for the second time ever, a year-over-year increase of 44 percent from [first-quarter] 2020,” said Hilding Anderson, head of retail strategy, North America, at Publicis Sapient. “Their key profit driver, AWS, also accelerated its growth this quarter for the first time since late 2018. And this remarkable revenue growth, if anything, understates the actual size of the revenue, since 55 percent of their sales in [the fourth quarter] flowed directly to third-party sellers.
“For context, this means their gross merchandise value already makes them the largest retailer in the world, easily surpassing Walmart by nearly $300 billion in 2020,” Anderson added.
Charlie O’Shea, vice president at Moody’s, credits several efficiencies that the company managed to pull off.
“Amazon’s [first-quarter] results, with operating income that exceeded the upper end of its guidance by well over $2 billion, are staggering, with North America Retail and International vastly improving operating margins despite meaningfully increased spending, reflecting the positive impact of the company’s ongoing investments to support the surge in retail volumes that have arisen due to the COVID-19 pandemic,” he stated. Further, he sees operational efficiencies continuing to juice the organization.
Capital expenditures approached nearly $50 billion over the past year, up 80 percent, primarily on logistics, infrastructure and data centers. On the earnings call, chief financial officer Brian Olsavsky said he believes it will be “another strong year” for these costs, which means the company is girding up for the future.
But for all of Amazon’s optimism, there’s also a lot of uncertainty about what that future will actually look like.
With more than 135 million Americans now having gotten at least one shot of the COVID-19 vaccination, the much-anticipated return to physical shopping and likely higher spending on experiences casts some doubt on how the rest of 2021 will pan out for Amazon.
O’Shea believes this hasn’t escaped the company and, in fact, informed its projection over the next three months.
“Guidance for [the second quarter], with a $3.5 billion variance in operating income, reflects Amazon’s view that there remains significant variability in potential retail performance,” he added, “much of which is driven in our view by uncertainty surrounding the short-term impact on consumer shopping habits as the overall retail environment moves toward some level of normalcy.”
Another variable is that, as announced, chief executive officer Jeff Bezos will hand the reins over to Amazon Web Services CEO Andy Jassy in the third quarter of this year. This transition might be a signal that the company will double down on its AWS cloud services.
That could be a given, considering that the division has become a bedrock of the business, delivering 12 percent of Amazon’s total revenue.
In a statement, Bezos framed AWS and its Prime Video as offshoots of the company that have been maturing: “Two of our kids are now 10 and 15 years old — and after years of being nurtured, they’re growing up fast and coming into their own,” he said, referring to Prime Video and AWS, respectively.
Of course, that is but one slice of Amazon’s enormous domain. Olsavsky credited some of the momentum to international revenue growth on the earnings call. But it’s clear the company also continues to invest in the customer experience.
In its announcements, Amazon called out a number of updates it has implemented across the organization, from devices to services.
This includes Amazon’s “try before you buy” Prime Wardrobe offering, which “expanded selection and launched new innovations for customers, including the ability to chat live with Amazon Stylists for personalized recommendations and trial items recommended by their favorite fashion influencers and websites,” the company said. It also expanded Discover Rooms, an immersive shopping experience for home furnishings, which is now live in nine markets across North America, Europe and Asia.
One takeaway for shoppers, and also financial analysts, is that Prime Day will return to its summer timeframe. The Amazon sales extravaganza, which will take place in June, was postponed last year to October, in a change that bolstered the company’s holiday quarter.
At press time, there hadn’t been any mention of the union vote in Bessemer, Ala., or the fresh remarks made by President Joe Biden to Congress on Wednesday night that called out the massive profits of companies and the huge salaries of corporate executives, compared to the low taxes they pay.
Bezos is worth more than $200 billion. And if Amazon keeps performing like this, he may be worth more by the time he relinquishes his CEO role.
By: Adriana Lee
